recovery after the reforms of 1708ÔÇ“1709 is reviewed in M. F. Lang, El monopolio estatal del mercurio en
el M┬┤xico colonial (Mexico: Fondo de Cultura Econ┬┤ mica, 1977), Chapter 4.
e o
D. Brading, Mineros y comerciantes, p. 248, points out that the Fagoaga family, the wealthiest silver
16
miners Guanajuato in the eighteenth century, insisted on the association between mining productiv-
ity and taxes, arguing that ÔÇť´¬üscal branches such as tobacco and the sales tax (alcabalas) have bene´¬üted
from the acquisitive power created by the payment of salaries to workers (in the mines).ÔÇŁ
The ´¬ügures are from Antonia Heredia Herrera, La renta del azogue en Nueva Espa╦ť a, 1709ÔÇ“1751
n
17
(Sevilla: Escuela de Estudios Hispanoamericanos, 1978), pp. 238ÔÇ“239 and R. Garner and S. E.
Stefanou, Economic Growth and Change, p. 133.
The minting rate at the Casa de Moneda de M┬┤xico in the decade 1781ÔÇ“1790 increased from 19.2
e
18
million pesos per year to an average 23.2 million pesos per annum in 1791ÔÇ“1810, greater than that
in any previous era in the colonial epoch. V┬┤ctor M. Soria, La Casa de Moneda bajo la administraci┬┤n
─± o
borb┬┤nica, 1733ÔÇ“1821 (Mexico: Universidad Aut┬┤ noma Metropolitana, 1994), p. 69.
o o
190 Bankruptcy of Empire

warships traveling from Seville and C┬┤ diz to the Spanish American ports
a
of Veracruz and Cartagena. Nevertheless, during the First Naval War with
Britain (1796ÔÇ“1801) and, above all, during the Second Naval War (1804ÔÇ“
1808) the supply of mercury for the American mines as well as the paper
required by New SpainÔÇ™s tobacco monopoly required new carriers. Nei-
ther royal warships nor Spanish merchant vessels could cross the Atlantic
without running the risk of being captured by the dominant British Navy.
To overcome these serious obstacles, the Madrid authorities decided to
use neutral commerce to their advantage and to negotiate private trade
agreements with merchant houses that could guarantee delivery of key
supplies from Europe to the colonial administrations.19 In the case of the
tobacco and quicksilver monopolies, the Anglo-Spanish merchant ´¬ürm of
Gordon & Murphy received the most important contracts and hence was in
a position to exercise a prominent role in the royal commerce and ´¬ünance of
New Spain. This private enterprise thus assumed the traditional functions
of supplier of crown commodities, receiving, in return, the right to extract
large volumes of silver, both on public and private account.
Gordon & MurphyÔÇ™s successful management of these operations was due,
in good measure, to the fact that it already operated as an international
trading conglomerate with a broad-ranging network of mercantile partners
and correspondents in Malaga, C┬┤ diz, Lisbon, London, Hamburg, Jamaica,
a
New Orleans, Havana, and Veracruz. Also of critical importance were their
excellent political contacts in Spain, New Spain, and England.20 This is
con´¬ürmed, on the one hand, by the fact that in the midst of wars, the Spanish
crown assigned this merchant house responsibility for the transfer of of´¬ücial
correspondence between the metropolis and the colonies and, in the second
place, by their ability to obtain English government licenses allowing free
passage to Spanish America and avoiding dangerous confrontations with
the British Navy.
The ´¬üscal and ´¬ünancial signi´¬ücance of these special mercantile contracts
for the sustenance of the Spanish empire has been underestimated by the
majority of historians that have analyzed neutral commerce between 1797ÔÇ“
1799 and 1805ÔÇ“1808. It is traditionally argued that the main factor leading
to authorization of neutral trade in Veracruz and other American ports was
the desire of Spanish authorities to sustain private transatlantic trade in
years when the French and Spanish navies were at a clear disadvantage to

19 The policy was not a complete novelty. In fact, from the early 1790s the Crown had looked for
alternative mercury sources to those from Amaden by buying large amounts from mines in Saxony.
According to D. Brading, Mineros y comerciantes, p. 320, already by 1793, sales of German mercury
tripled those of Castilian mercury in New Spain.
20 The most detailed analysis is that of G. Jim┬┤ nez Codinach, ÔÇťAn Atlantic Silver Entrepot,ÔÇŁ Chap-
e
ter 6.
Royal Treasury and the Gordon & Murphy Consortium, 1806ÔÇ“1808 191

the British Navy: for example, as a result of the naval blockade imposed
by British warships in 1797, imports to the port of Veracruz declined from
a level of 6 million pesos in 1796 to barely 500,000 pesos the following
year; exports declined even more abruptly from 7 million pesos to a meager
238,000 pesos in 1797.21 However, by supporting neutral trade, metropoli-
tan and colonial of´¬ücials not only sought recovery of private trade but also
sustained the important lines of communication and of commerce under
the direct control of the Crown, which were essential to the operation of
the ´¬üscal system of the Spanish imperial state.

The First Naval War with England (1798ÔÇ“1802) and the
Royal Licenses for Neutral Trade at Veracruz: The Role
of the Murphy Trading Firm
Neutral trade formally began with the royal decree issued by Charles IV on
November 18, 1797, authorizing the entrance and exit of ships from neu-
tral countries at different Spanish American ports. This measure was adopted
after the outbreak of war with England and the consequent blockade by
the British Navy of SpainÔÇ™s communications with its colonies. After the
defeat of the Spanish Navy at the great battle of San Vicente, off the coast
of northern Spain, on February 14, 1797, the interruption of the Spanish
transatlantic ´¬‚eets and even shipping within the Caribbean virtually para-
lyzed the external trade of Spanish America as well as ´¬ünancial transactions
essential to the empireÔÇ™s survival.
To renew trade ´¬‚ows and public and private silver remittances from the
Indies, the Madrid Cabinet approved a new commercial policy which broke
with the traditional monopoly of the C┬┤ diz merchants and shippers over
a
most Spanish American trade. Permits were granted to captains of ships
from neutral countries ÔÇ“ the United States, Portugal, Denmark, and several
German states such as the city-state of Hamburg ÔÇ“ to land and load merchan-
dise at speci´¬üc Spanish American ports.22 In good measure, the success of
this policy depended on the British NavyÔÇ™s agreement to the free movement
of neutral shipping. Between 1797 and 1802, the British governmentÔÇ™s atti-
tude was ambivalent since neutral trade was perceived to be not entirely
in its interest, especially because of competition of the merchant marine of
the United States. Nonetheless, British authorities did consider that more

open trade with Spanish America could have some positive results. As a
result, the Foreign Of´¬üce also began to supply permits to numerous vessels
(of diverse nationalities) in the Caribbean to land and load cargos at various
ports in the Gulf of Mexico and in the West Indies.23 A report of 1801,
for example, indicated that over one hundred, mainly Spanish, vessels left
Port Cabello, in colonial Venezuela, with English licenses to carry cotton,
coffee, mules, and other items for the British West Indies.24
Despite the fact that the English authorities recognized the possible
bene´¬üts of neutral trade, they also feared that its legalization could favor
their competitors (especially the North Americans) and reduce the pro´¬üts
of the British ships and merchant ´¬ürms operating out of the Bahamas,
Trinidad, and above all Jamaica, with its ample Caribbean-wide smuggling
trade. Hence it was not strange that British frigates applied themselves to
capturing many neutral ships sailing in the zone.25 The risks were high, but
U.S. shippers increased their activities in Caribbean using Spanish trading
licenses.26 According to a statistical analysis by economic historian Javier
Cuenca, North American exports to Spanish America shot up from scarcely
one million dollars in 1796 to close to ten million dollars annually, between
1798 and 1801, while imports grew even more rapidly.27 The bulk of this
trade was initially with Cuba and Venezuela, although it soon expanded
to San Juan de Puerto Rico, Santo Domingo, Veracruz, and various other
Spanish American ports. A study of Philadelphia trade con´¬ürms that the
growth of commerce with Cuba was particularly notable: in 1793 only nine
North American ships had arrived to Philadelphia from Havana, but after

23 Interestingly, Mahan explained this phenomenon in terms of the growing importance of neutral trade
in Europe itself, beginning with the War of the French Convention (1793ÔÇ“1795) and increasing in
later years as a result of maritime con´¬‚icts between France, Great Britain, and other powers. Alfred
Mahan, The In´¬‚uence of Seapower upon the French Revolution and Empire, 1793ÔÇ“1812, vol. 2 (London:
Sampson Low, Marston, 1892), Chapter 17.
Dorothy Buerne Goebel, ÔÇťBritish Trade to the Spanish Colonies, 1796ÔÇ“1823,ÔÇŁ American Historical
24
Review, 43, 2 (1938), 292.
An important historical source on neutral trade in the Caribbean and the role of the British Navy is
25
Francois Crouzet, LÔÇ™Economie Britannique et le Blocus Continental (1806ÔÇ“1813), vol. 1 (Paris: Presses
┬Ş
Universitaires de France, 1958), pp. 178ÔÇ“185, but also see A. Mahan, The In´¬‚uence of Seapower,
pp. 218ÔÇ“252. The French corsairs were very active in this period, taking 580 merchant ships in the
┬┤
Antilles between 1797 and 1800. See the exhaustive analysis in Ulane Bonnel, La France, les Etats
Unis et la guerre de course, 1797ÔÇ“1815 (Paris: Nouvelles Editions Latines, 1961).
According to one estimate, a total of ´¬üfty-six neutral ships arrived in Veracruz between 1797
26
and 1799 of which forty-four were North American. See J. Ortiz de la Tabla, Comercio exterior,
p. 327.
Javier Cuenca Esteban, ÔÇťStatistics of SpainÔÇ™s Colonial Trade, 1792ÔÇ“1820: Consular Duties, Cargo
27
Inventories and Balance of Trade,ÔÇŁ in Hispanic American Historical Review, 61, 3 (1981), 381ÔÇ“
428.
Royal Treasury and the Gordon & Murphy Consortium, 1806ÔÇ“1808 193

the rati´¬ücation of neutral trade in 1797, forty-eight ships arrived in that
year, then ´¬üfty-eight ships in 1798, and ninety-eight in 1801.28
Historical research on trade in the port of Veracruz in this period has
emphasized the high volume of neutral trade but neglected the commerce
conducted by the Spanish crown to ensure supplies for the state monopolies
of New Spain.29 The members of the Veracruz Merchant Guild (Consulado de
Comercio de Veracruz) were the principal bene´¬üciaries of the new transactions,
although clearly, some ´¬ürms pro´¬üted more than others.30
Among the most conspicuous participants in neutral trade in Veracruz in
the years 1797ÔÇ“1799 were the associates of the merchant house of Thomas
and Matthew Murphy, in alliance with their Spanish kin. This activity
would constitute a key precedent for their later activities between 1806 and
1808. The history of this cosmopolitan family of Atlantic traders reveals
the complexity of the economic, political, and family networks that were
indispensable to the success of the largest commercial operations carried
out in the midst of the maritime wars between Great Britain, France, and
Spain in these tumultuous decades. The Murphy family was Irish Catholic
and ÔÇ“ like other compatriots ÔÇ“ had originally settled in southern Spain at
the beginning of the eighteenth century. The ´¬ürst Murphys to arrive in
Andalusia opened trading houses in Malaga and C┬┤ diz, specializing in the
a
31
export of sherry to England. Toward the end of the 1780s, the Malaga
Shipping Company (Compa╦ť ┬┤a de Navieros de M┬┤ laga), led by Juan Murphy,
n─± a
negotiated important contracts for the delivery of large quantities of paper
and other essential products for the royal monopolies of New Spain.32 In
short, the links between this merchant company and the royal treasury had,
for some time, constituted a solid source of this cosmopolitan ´¬ürmÔÇ™s income.
In the 1790s, Juan Murphy acquired several frigates and in 1802 opened
a branch ´¬ürm in London in conjunction with William Gordon, a nephew
of James Duff, English merchant at C┬┤ diz.33 The London house eventually
a

28 Roy Nichols, ÔÇťTrade Relations and the Establishment of the U.S. Consulates in Spanish America,
1779ÔÇ“1809,ÔÇŁ Hispanic American Historical Review, 13 (1933), 289ÔÇ“313.
29 An exception is J. Barbier, ÔÇťPeninsular Finance and Colonial Trade,ÔÇŁ 25ÔÇ“31.
30 On the Merchant Guild of Veracruz, founded in 1796, and its members, see the excellent doctoral
thesis, M. Souto, ÔÇťConsulado de comercio.ÔÇŁ
31 Many of the Irish Catholic who emigrated to Andalusia became engaged in the production and export
of sherry to England, the major market. Domecq, a well-known ´¬ürm in this sector, was originally an
off-shoot of Gordon & Murphy after the latter declared bankruptcy in 1822; G. Jim┬┤ nez Codinach,
e
Gran Breta╦ť a y la independencia de M┬┤xico, p. 249.
n e
32 S. Stein, ÔÇťCrisis metropolitana,ÔÇŁ p. 201 contains details; also see S. Deans-Smith, Bureaucrats, Planters
and Workers, p. 101.
33 S. Stein, ÔÇťCrisis metropolitana,ÔÇŁ p. 201ÔÇ“202; according to Ram┬┤ n Sol┬┤s, El C┬┤ diz de las Cortes: la
o ─± a
vida en la ciudad en los a╦ť os de 1810 a 1813 (Madrid: Alianza, 1969), p. 127, Juan Murphy was the
n
owner of six frigates in C┬┤ diz in 1810.
a
194 Bankruptcy of Empire

became regarded as one of the most important in that great city because of
the volume of their commercial operations. According to a report in 1811,
Gordon & Murphy had more than 60 employees in their London house
and 300 elsewhere, including various European countries and, of course, in
Spain and Mexico.34
It is not known exactly when the brothers of Juan Murphy, Mateo,
Lorenzo, and Thomas, emigrated to Veracruz, but they were among the
most important merchants of that port in the 1790s. The Murphy brothers
immediately became prominent members of the Veracruz Merchant Guild
when founded in 1796. Their international links were more extensive than
those of the majority of their colleagues at the leading Mexican port ÔÇ“ a
fact that re´¬‚ected the importance that family networks had for international
trade operations in the period.35 Perhaps the most politically active member
of the Veracruz branch of the family was Thomas Murphy, who had been
a con´¬üdant of Viceroy Revillagigedo (1789ÔÇ“1794) and who also became
friendly with Spanish Prime Minister, Manuel de Godoy, as a result of
travels from Mexico to Madrid, presumably to strengthen the contacts
necessary for his transatlantic business. MurphyÔÇ™s opportunism can be seen
in his marriage to Manuela Alegria, daughter of one of the chief treasury
of´¬ücers at Veracruz. This was a key alliance as this connection made Thomas
Murphy brother-in-law (concu╦ť ado) of the new Viceroy Azanza (1798ÔÇ“1800),
n
who subsequently favored the Veracruz trader with much business that later
helped the expansion of his ´¬ürm.36
The concession in 1798 of two kinds of trading licenses promoted a
considerable increase in the business of the MurphyÔÇ™s company at Veracruz.
The permits allowed for the entrance of merchant ships into Veracruz, ´¬‚ying
a neutral ´¬‚ag, bringing mainly textile cargos. As a result, the house of
Murphy rapidly developed a strong network of partners and correspondents
active in various ports, ranging ÔÇťfrom Veracruz to Havana, New York,
Boston, New Orleans, Salem, Lisbon, C┬┤ diz, Malaga, London, Hamburg,
a
Copenhagen and other European and American ports.ÔÇŁ37
Another kind of permits granted by the viceroy to Thomas Murphy
were licenses to negotiate the recovery of consignments of mercury and
paper that had been carried by Spanish ships but captured by the British

34 Pro´¬üts for 1811 were estimated at ┬ú237,000. Few merchant houses in London rivaled them. See G.
Jim┬┤ nez Codinach, Gran Breta╦ť a y la independencia de M┬┤xico, p. 257, n. 119.
e n e
35 Mateo Lorenzo Murphy was named an elector (elector) of the Veracruz Merchant Guild in January
1804, while Thomas Murphy was elected to the same guild in 1807. On the international partners